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CA Public Employees' Retirement Fund Steady Amid Economic Downturns

Monday's slide in overseas stock markets caused US markets to tank early in the day, but after a shaky start, Wall Street rebounded some Tuesday. With more economic uncertainty ahead, we got to wondering about the safety of California's Public Employees retirement system or CalPERS. KPCC's Julie Small reports.

Julie Small: Jitters over the U.S. economy sent a shock wave around the world that came washing back to Wall Street. But that didn't faze the fund managers at CalPERS. Chief information officer for investments, Clark McKinley, says the fund was built to weather the worst economic downturn in U.S. history.

Clark McKinley: You know, started in the depths of the depression back in 1932, so we've had 76 years of ups and downs. And we've come through it. It's kind of like a big battleship that, you know, you can go through a typhoon, and you're in a lot better shape than if you're a motorboat. And that's the way it's been with us. We're a long-term investor. So we don't make any market corrections on the spot. We just ride it out, basically.

Small: The fund's lost $21 billion since October, about 8% of its value. But McKinley says that won't affect the one and a half million Californians enrolled in the plan.

McKinley: You know, the program has been nearly fully funded, which means if everything stopped right now, we'd still have money to pay all of our obligations to people who are presently in the system.

Small: During the last recession, CalPERS lost 50 billion, but eventually recovered that money and gained 70 billion more. The fund's Clark McKinley says individual investors in tiny boats will have a much harder time surviving a storm like that. His best advice: diversify that portfolio, and be prepared to wait for fair weather.